Enacted in November 2019, the EB-5 Modernization Rule marked the first major set of changes to EB-5 rules and regulations since the program was enacted in 1990. 

A predictable spike in I-526 filings before the new rules came into effect was followed by an equally inevitable decline in applications afterwards. The pandemic’s disruptive impact affected EB-5 filings too but things were expected to return to normal soon.

Now, a surprise judicial ruling combined with a legislative omission has thrown the EB-5 program into total disarray. 

On March 15, 2023: The EB-5 Visa minimum amount changed to $800,000 in a TEA and $1.05 million for non-TEA project investment.

On January 5, 2022: the Department of Homeland Security (DHS) filed an unopposed motion to dismiss its appeal to the Behring Regional Center lawsuit that lowered the amount to $500,000.

On December 30th 2021: U.S. Citizenship and Immigration Services (USCIS) updated language on its website pertaining to the continued EB-5 Regional Center Program lapse and its impact on pending investors’ petitions. The agency noted that it is “reevaluating the decision to hold, or not act on, any pending petition or application” dependent on the statutory authorization that expired on June 30, 2021.

Behring Ruling

The new EB-5 Modernization rule was challenged in different courts and arguments against the Final Rule ranged from economic harm to a technical flaw in the appointment of the then Acting Homeland Security Secretary.

Although the court refused to rule on the economic merits of the rule, it ruled that the appointment had not been done as per the provisions of the law and, consequently, held that the EB-5 Modernization rule was not valid. 

This legal effect of this ruling is that the EB-5 program will function as if the 2019 Final Rule had never been implemented. This means-

  • Investors can qualify for the EB-5 visa by investing $1 million; $500,000 for TEAs. 
  • States regain the authority to designate Targeted Employment Areas since the DHS is no longer the sole authority with TEA-designation powers. 
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Regional Center Program Expiry

The invalidation of the Final Rule would have been very good news for EB-5 investors except that the preferred route for more than 90% of all EB-5 investors had expired.

The 1990 Immigration Act establishes the EB-5—Direct Investor visa. The Regional Center Program was enacted as a Pilot program in 1993, which meant it was a temporary program that would continue as long as the US Congress extended its validity. 

Valid till June 30, 2021, the Regional Center Program expired after lawmakers failed to arrive at a consensus regarding its extension. Unlike the last time the RC program expired, no petitions related to Regional Center projects are being accepted, which means the advantage of the Behring ruling is restricted only to direct EB-5 investors.  

EB-5 in Flux – Avoidable Risk or an Excellent Opportunity?

The most significant aspect of the two developments is there’s absolutely no clarity about the way ahead. 

Will the government appeal against the rule that declared the Final Rule invalid? Or will it simply re-promulgate the Final Rule by a properly-appointed authority? Or was the increase in minimum investments a mistake and that it’s back to $1million/$500,000 limits for the EB-5 visa? 

Is the Regional Center program dead? Will thousands of Chinese, South Korean, Vietnamese, and Indian investors have no choice but to transit to becoming direct EB-5 investors?

The current legal position is clear – a direct EB-5 investor can qualify by investing just $500,000 in a Targeted Employment Area. This is a fantastic opportunity provided you have the right investment and business strategy in place. 

But, hastily investing in a direct project with little compatibility to the NCE/JCE investment structure can easily backfire. Further, minimum ten direct jobs with no counting of indirect jobs too must be considered. 

The safe but passive option is to just wait and hope that the Regional Center program will be reauthorized. A potential alternative would be to explore available options with professional investment and immigration guidance to explore how opportunities that the recent flux in the EB-5 program might be pursued to your advantage.

Related articles: EB-5 Cost Change Final Ruling on Behring Regional Center LLC V. Chad Wolf, et al | EB-5 Source of Funds: Requirements and Best Practices